Jason Anderson Suspended by Texas State Securities Board

Date: February 1, 2018

Beaumont, Texas financial advisor Jason Anderson, a former registered representative of LPL Financial, LLC, Kovack Securities, Inc., and IFS Securities, was suspended by the Texas State Securities Board on January 30, 2018. According to the state regulator, Mr. Anderson began using an active trading strategy he developed himself for many of his clients. This strategy involved a high level of turnover in the affected client accounts, meaning there were a large number of both purchases and sales of various securities. The problem with the strategy, according to the regulator, was that Mr. Anderson did not account for the costs he was incurring in his clients’ accounts by trading this heavily. For at least one client, Mr. Anderson’s trading generated such high costs that the client would have needed to generate a return of almost 30% of the account’s value just to break even. In practice what that means is that the clients accounts are faced with huge risks of loss, but without any realistic chance that they will make any money, even if the trading is successful. Any profits Mr. Anderson could generate would be lost in the fees. If the trading was unsuccessful, then the clients are saddled with massive costs on top of the trading losses. This kind of high volume, high commission trading is referred to as “churning,” where effectively the only person who stands any real chance of making money is the broker. As a result of this conduct, Mr. Anderson was suspended from operating within the state of Texas for 90 days.

This is also not Mr. Anderson’s first trouble with securities regulations. In January 2016, LPL Financial fired him for allegedly exercising discretionary authority over client accounts without authorization. The default rule in the securities industry is that no trade can be placed in a client’s account without express authorization at the time of the trade that the particular security is to be bought or sold. Under some circumstances, clients may grant “discretionary authority” to an advisor or the firm to place trades in the account without being required to get that express authority on a trade by trade basis. However, discretionary authority needs to be in writing and signed by the client. According to LPL, Mr. Anderson was exercising discretionary authority without getting the necessary client permission to do so. Four months later, Mr. Anderson was fired yet again by Kovack Securities, this time based upon a finding during an audit that Mr. Anderson was having clients sign account paperwork that was incomplete.

Finally, in December 2016, a client of Mr. Anderson filed an arbitration claim alleging that the client’s account had been churned, that the trading was unauthorized, and that the account was otherwise mismanaged for almost a decade. These allegations mirror almost identically the findings of both Mr. Anderson’s former employers and the securities regulator. Often, when a firm or a financial advisor engage in wholly inappropriate trading with one of their clients, there are many other clients who were mistreated, misled, or otherwise hurt without even realizing it. If you are or were a client of the Jason Anderson and believe you may have been inappropriately invested or otherwise lost money with them, contact the law firm of Shepherd, Smith, Edwards & Kantas LLP for a free, no obligation evaluation of your account to determine if you might have a claim to attempt to recover some or all of your losses. All communications will be kept strictly confidential, and you will not be billed in any way for a consultation.